IBI-Rating has upgraded the bank deposit reliability rating of «MIKHAILOVSKY BANK» to 4+ grade

IBI-Rating informs on upgrading of the rating of bank deposit reliability of «MIKHAILOVSKY BANK» PJSC from grade «4» to grade «4+» (high reliability).

The rating of bank deposit reliability at grade 4+ indicates that the financial institution is reliable, pays timely its obligations within the requirements established by the current legislation of Ukraine, including those of the National Bank of Ukraine. The likelihood of problems with a timely return of deposits is low, although there is a certain dependence of the financial institution on the impact of external and internal factors. The impact assessment of external factors does not apply to the situations involving force majeure circumstances. The upgraded rating of bank deposit reliability of the Bank is due to the growth of its key performance indicators, which demonstrate a significant positive trend in spite of the unstable situation in the country and the Bank's operations in the risky segment (consumer credit), as well as adequate capitalization ratios, as evidenced by the sufficient actual value of the regulatory capital adequacy ratio. Capital provides partial coverage of credit and investment risks. «MIKHAILOVSKY BANK» PJSC meets its obligations to creditors in a timely manner and in full. The actual values of liquidity ratios are at a sufficient level. However, its assets and liabilities are not properly balanced on terms to maturity and the negative gaps in certain periods accounted for over 10% as at 01.07.2015, which increases the Bank's vulnerability to liquidity risk in these periods. At the same time, the implementation of credit and market risks may also put pressure on the Banks' liquidity. It should be noted that in the analyzed period a deterioration in asset quality was observed, which was reflected in the increasing number of overdue debts, but their share in the customer loan portfolio remained low. However, the Bank's dependence on financial condition of its major borrowers increases the Bank’s vulnerability to credit risk. Also, the impact of susceptibility to financial risks may increase as a result of the persistence of negative trends in the economy and reduced solvency of borrowers.

The main sources of funding of assets are amounts due to customers and the owner’s funds. The available concentration of the resource base by major creditors increases the Bank’s vulnerability to liquidity risk. Also, given the country’s current situation, a significant amount of funds of individuals represents a potential threat to deteriorating of liquidity due to decreasing confidence of the population in the banking system. However, the rating agency «IBI-Rating» did not reveal any significant complaints from the customers to the Bank’s operations. Based on the results of the 1st half of 2015 the Bank's activity was profitable. And due to an increase in net operating income and a decrease in contributions to provisions for reserves, the Bank’s performance indicators have grown and are now at an acceptable level.

A positive impact on the rating of bank deposit reliability may have the following: reduced dependence on the financial condition of the Bank's major borrowers, reduced concentration of the resource base by creditors, as well as the implementation of the main directions of the Bank’s development strategy. A negative impact on the rating of bank deposit reliability may have the following: deterioration of the Bank’s solvency (liquidity), the implementation of credit risk due to deterioration in quality of the granted loans, increased vulnerability of the Bank to market risks, loss-making operations, as well as the deterioration of the political and economic situation in the country.

In order to carry out the analytical research the materials provided by «MIKHAILOVSKY BANK» PJSC were used, including the annual financial statements for 2013-2014 and the 1st half of 2015, target performance indicators for the IInd half of 2015, other necessary internal information as well as the information from public sources, which the rating agency considers reliable.

Finance department
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